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The 2nd Circuit Court of Appeals in New York said it will wait until September to review a judge's rejection of a proposed settlement between the Securities and Exchange Commission and Citigroup regarding mortgage securities. The court has indicated that an appeal by the SEC likely will succeed, but the delay means Judge Jed Rakoff's ruling remains law for several more months.

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A three-judge panel of the 2nd U.S. Circuit Court of Appeals suspended a ruling by Judge Jed Rakoff blocking a $285 million settlement between the Securities and Exchange Commission and Citigroup over securities law violations. "[T]he scope of a court's authority to second-guess an agency's discretionary and policy-based decision to settle is at best minimal," the court wrote. The panel also criticized the SEC for settling the case without an admission of liability from the defendant.

The 2nd U.S. Circuit Court of Appeals has ruled that while it needs to hear more arguments, there's a good chance it will allow the Securities and Exchange Commission and Citigroup to move ahead with a $285 million settlement related to mortgage investments. U.S. District Judge Jed Rakoff in New York last year made the controversial decision to reject the settlement, but the appeals court said there was "no reason to doubt" the SEC's decision that the October settlement was in the public's interest.

The Court of Appeals for the Second Circuit in New York ruled that the Securities and Exchange Commission likely will win an appeal of a judge's rejection of its proposed settlement with Citigroup. Judge Jed S. Rakoff last year rejected the SEC's proposed settlement with the bank in a case focused on the sale of mortgage-related securities.

Lawyers for the Securities and Exchange Commission said courts must find proposed settlements "fair, adequate and reasonable." They said U.S. District Judge Jed Rakoff's determination that settlements must be "in the public interest" is an error. "The commission respectfully submits that the district court in SEC v. Citigroup Global Mkt. erred in adding the requirement that a reviewing court also find such judgments to be in the public interest," SEC attorney Andrea Wood said in a filing.

Judge Jed Rakoff of the Federal District Court in Manhattan on Monday rejected a Securities and Exchange Commission settlement with Citigroup in a case targeting its sale of mortgage-backed securities. Rakoff, who has previously sought to defend the public interest in securities cases, struck the settlement in which Citigroup admitted no wrongdoing, saying that "the court, and the public need some knowledge of what the underlying facts are." Rakoff's decision could shape future SEC settlements, requiring defendants to admit liability.